Oregon Administrative Simplification Strategy and Recommendations

Transcription

1 Oregon Health Authority Office for Oregon Health Policy and Research Oregon Administrative Simplification Strategy and Recommendations Final Report of the Administrative Simplification Work Group June 2010

2 Table of Contents Page Administrative Simplification Work Group Membership... ii Executive Summary...1 Background...3 An Oregon Strategy for Administrative Simplification...5 Oregon Administrative Simplification Recommendations...9 Next Steps...15 Appendix A Administrative Simplification Savings Projections...17 Appendix B Recommended Outline for Administrative Rules...22 Appendix C Health Information Exchange Timeline...23 Appendix D Glossary...24 Appendix E Provider and Payer Survey on Administrative Transactions:...26 A Report to the Health Policy Board i

3 Administrative Simplification Work Group Membership Co-Chairs Laura Etherton OSPIRG Dale C. Johnson, Jr., Blount International Members: Rhonda Busek Lane IPA Todd Bybee Tuality Hospital Tom Chamberlain Oregon AFL-CIO Alice Cobb Division of Medical Assistance Programs Erick Doolen Pacific Source Health Plans Nancy Franssen Corvallis Clinic Tyla Kennedy NW Human Services Mary Kjemperud Legacy Health System Ann O Connell OHSU Carol Robinson Health Information Technology Oversight Council Mike Schwab Portland Clinic Tonja Siefarth West Valley Hospital Barney Speight Oregon Health Authority Dan Stevens Providence Health Plans Doug Walta, MD Providence Health and Services Nelda Wilson Int. Union of Operating Engineers, Local 701 Ex Officio: Teresa D. Miller Insurance Division Joan Kapowich Public Employees Benefits Board Staff: Sean Kolmer, Deputy Administrator Oregon Health Policy and Research Lynn-Marie Crider, Policy Analyst Oregon Health Policy and Research ii

4 Executive Summary The 2009 Oregon Legislative Assembly directed the Office for Oregon Health Policy and Research (OHPR) to bring together a work group to recommend uniform standards for insurers for, at a minimum, eligibility verification, claims processes, payment remittance advice, and claims payment. The Oregon Health Policy Board asked the work group to expand the legislative direction and include a broad strategy for administrative simplification, including specifying the appropriate role for the state, and to estimate the potential for cost savings that can be achieved through administrative simplification. The goal of administrative simplification is to reduce total system costs and reduce the amount of provider resources that must be devoted to administrative transactions between providers of care and payers by simplifying and streamlining these activities. The keys to simplification are elimination, standardization, and automation of processes. In Oregon, many transactions that would be automated in other industries are still performed manually by most providers and many payers. The healthcare industry is unlikely to take major strides toward automated processes until there is greater standardization of the methods for conducting the transactions electronically. Standardization has proven difficult for the industry to achieve on a voluntary basis. Standardization requires each individual business to make upfront investment in changing systems and work processes. Such investments are rational only if all, or nearly all, providers and payers with which they deal are making similar investments at the same time. Therefore, the state has a central role in enabling the industry to move forward together to greater simplification and automation of administrative processes. The state s role in administrative simplification should be to identify and adopt standardized and automated ways to do business and to require payers and providers of healthcare to use those standard, automated processes. In addition, the state should work with the healthcare industry to monitor progress toward adoption of the standardized and automated ways of doing business, identify opportunities for additional standardization, and set priorities, goals, and benchmarks for additional standardization. The work group recognized that the federal reform legislation enacted this year addresses administrative simplification issues. The legislation requires the U.S. Department of Health and Human Services to periodically revise its standards for HIPAA electronic transactions and sets deadlines for issuing uniform operating rules for each of the HIPAA transactions. The workgroup concluded that the federal reform law should inform Oregon s efforts but does not eliminate the need for state-level action. The work group estimates that failure to take these steps outlined in this report would cost Oregon payers and providers nearly $100 million in administrative savings each year. The work group makes the following recommendations: Office for Oregon Health Policy & Research 1

5 Recommendation #1: Oregon should adopt the Minnesota approach to standardization and automation. Recommendation #2: Oregon requirements for standardization and automation should be phased-in. This means that providers and payers should be given time to adjust to the changes. Recommendation #3: Oregon should lead. Oregon should not wait for the federal government to standardize HIPAA transactions. Recommendation #4: Technical assistance to providers will be important to help providers adjust to and take full advantage of administrative simplification opportunities. Recommendation #5: There is need for on-going public-private partnerships to identify successes, challenges, and opportunities for future administrative simplification. To carry out these recommendations, the following steps will need to be taken: The Department of Consumer & Business Services (DCBS) must adopt by rule uniform companion guides for eligibility verification, claims, and payment remittance advice by adapting the Minnesota uniform companion guides. The rules should require insurers and the providers that do business with them to conduct the transactions electronically about a year after adoption of each uniform companion guide. The Legislature must enact legislation in 2011 giving DCBS authority to establish uniform standards for healthcare administrative transactions to all payers (including third party administrators and self-insured plans) and clearinghouses and to collect data from them to monitor progress and identify future opportunities. The Oregon Health Authority as a payer should follow the DCBS rules and require Medicaid managed care organizations, Medicaid providers, and others with which it deals to do so as well. DCBS must require insurers and other payers to perform additional transactions electronically on a phased-in basis between 2014 and 2016 setting the dates for each transaction to go all-electronic no later than one year after a HIPAA standard and uniform companion guide or uniform operating rules have been adopted by the U.S. Department of Human Services. The industry should bring forward its recommendation to develop a single sign-on to health plan web portals and a single source for information used in physician credentialing. In addition, the industry should identify and develop additional opportunities for standardization. The Insurance Commissioner and the Director of the Oregon Health Authority should take joint responsibility for continued progress toward greater administrative simplification. They should carry out these responsibilities in collaboration with providers and payers, collecting data to evaluate progress; establishing priorities, goals, benchmarks, and timelines; and using rulemaking authority as necessary. Office for Oregon Health Policy & Research 2

6 Background The health care delivery system in the United States is unquestionably the most expensive in the world. 1 Administration of insurance in the United States is less efficient than insurance administration in the rest of the developed world. 2 In Oregon, the major insurance carriers spend about 10-15% of premium on health insurance administration including marketing, underwriting, medical management, claims administration, and profit. 3 A recent study of the California market suggested that the portion of insurer administrative cost that goes for dealings with healthcare providers was 8.1% of premium. But insurers are not the only healthcare actors that have insurance-related costs. Hospitals, physicians, and other providers also incur costs for insurance administration. While there is no public reporting of those administrative costs, recent analyses suggest that health insurance-related activities consume 7-10% of hospital revenues and 10-15% of physician revenues. 4 It is unlikely that this level of administrative cost is inherent in the private insurance system. A recent case study of a large physician practice led one group of experts to conclude that more than 12% of physician revenue could be saved if some specific steps were taken, including much expanded use of standard electronic transactions, elimination of referral requirements and other medical management processes, and standardization of payment methods and rules. 5 While there is dispute over the magnitude of waste from administrative complexity, there is unquestionably room for very significant savings from simplification. Developing an Oregon Solution HB 2009 tasked the Office for Oregon Health Policy and Research (OHPR) with convening a work group to take on the issue of standardizing transactions and recommending uniform standards for adoption by the Department of Consumer and Business Services. 6 The 1 Healthcare Costs: A primer, Kaiser Family Foundation (2009), page 4. 2 Commonwealth Fund National Scorecard on U.S. Health System Performance, 2008 (citing Organization for Economic Cooperation and Development Health Data 2007). 3 Oregon s seven largest health insurers (omitting Kaiser Permanente, which operates differently) spent an average of 12-17% of premiums over the last five years for non-claims costs. See Health Insurance in Oregon, Department of Consumer and Business Services (January 2010), page See e.g., Merlis, Mark, Simplifying Administration of Health Insurance (released by the National Academy of Social Insurance, National Academy of Public Administration, and the Robert Wood Johnson Foundation 2009) at pages 5-9. Kahn, James G. et al., The Cost of Health Insurance Administration In California: Estimates For Insurers, Physicians, and Hospitals, Health Affairs, vol. 24, no. 6 (November/December 2005). 5 Blanchfield, Bonnie B., et al, Saving Billions of Dollars And Physicians Time By Streamlining Billing Practices (Health Affairs Web First, June 2010). 6 The language reads, in its entirety, as follows: SECTION The Director of the Department of Consumer and Business Services may establish by rule uniform standards applicable to health insurers licensed by the Department of Consumer and Business Services that incorporate the standards developed by the Office for Oregon Health Policy and Research pursuant to section 1193 of this 2009 Act. SECTION (1) The Office for Oregon Health Policy & Research 3

7 legislature specifically required the work group to develop uniform standards for claims (that is, provider bills to insurers), remittance advice (insurer explanation of payments made to providers), and eligibility verification (provider requests for information about a patient s health plan enrollment, plan benefits, and patient cost-sharing responsibility). 7 The Oregon Health Policy Board (the Board) asked the work group to develop a broad strategy for administrative simplification, including specifying the appropriate role for the state. The Board also asked the group to estimate the potential for cost savings achievable through administrative simplification. OHPR assembled a diverse work group including two individuals affiliated with commercial health insurers, one affiliated with a Medicaid managed care organization (Medicaid MCO) that is not a licensed insurer, three affiliated with hospitals, four affiliated with physician practices (including the OHSU clinic system and an ambulatory surgery center), two affiliated with health care purchasers (one human resources manager for a large business and the other a trustee for a Taft-Hartley Trust), one affiliated with an organization of consumers, one physician, one affiliated with organized labor, and the Director of the Health Information Technology Oversight Council (HITOC). The Administrator of the Public Employee Benefits Board and the Oregon Educators Benefits Board and the Administrator of the Insurance Division participated also. In addition to the work group members, two other important stakeholder groups were engaged throughout the development of these recommendations. The work group sought information from the HITOC concerning the preparation of the state s strategic plan for health information exchange, Medicare and Medicaid incentive payments available to physicians and hospitals for developing and implementing health information exchange capacities, the meaningful use requirements for accessing the inventive payments, and the HITOC s thoughts on the relationship between health information exchange development and administrative simplification. The Director of HITOC was a member of the workgroup to ensure effective coordination between recommendations from this workgroup with the work of HITOC. There were two members of the Health Leadership Council (HLC) on the OHPR work group to ensure coordination and opportunities for collaboration between the legislative intent of the workgroup and the industry led efforts currently underway. 8 The HLC leaders sitting on the OHPR work group took the work group s preliminary recommendations to the HLC Administrative Simplification Work Group for their discussion. They brought feedback to the OHPR work group process. Before convening the work group, OHPR surveyed providers and payers to accomplish three objectives: (1) To get a baseline measure of Oregon s progress toward adopting efficient Office for Oregon Health Policy and Research shall convene a stakeholder workgroup to develop uniform standards for health insurers licensed in this state, including but not limited to standards for: (a) Eligibility verification. (b) Health care claims processes. (c) Payment and remittance advice. 7 For a glossary of terms used in this report, see Appendix E. 8 The Health Leadership Council is the successor to the Health Leadership Task Force. Office for Oregon Health Policy & Research 4

8 methods for conducting business transactions between providers and payers, (2) to learn from providers and payers about the barriers to adopting more efficient methods of doing business, and (3) to offer providers and payers an opportunity to tell the work group what they thought would be most helpful in reducing administrative burden. The payer survey was conducted using a structured interview of health plan staff coupled with a request to plans to share some baseline data. The provider surveys were conducted by distribution of an electronic survey. (See Appendix E.) The group reviewed the results of the payer and provider surveys to better understand the concerns and opinions of providers and payers not directly involved in the work group process. In addition, the group reviewed studies of the potential for savings from moving from manual to electronic methods for doing a variety of transactions. The group heard reports from leaders in Washington, Minnesota, and Utah to consider whether to adopt the approach taken in any of these states or to recommend adoption of any products developed in those states. The group found that the three states had taken very different paths, determined in large part by when they began work on administrative simplification and the relative capacity of the state s private industry bodies to provide leadership. The three paths were distilled into alternative models for the state s role in administrative simplification and considered by the work group. Finally, when the federal health reform bills were enacted, the group reviewed the administrative simplification activities and timelines set by Congress. The work group identified guiding principles for its work that included: Use what s already built. Don t re-invent the wheel and coordinate with other states where possible, but make sure that whatever we borrow is appropriate to Oregon. Take advantage of time-sensitive opportunities. Take on projects that won t be done otherwise. Don t bite off too much. Do things with opportunity for return on investment. Prioritize activities that reduce cost or improve service for patients. Make any requirements that are developed applicable to everyone payers and providers alike. An Oregon Strategy for Administrative Simplification The goal of administrative simplification is to reduce total system costs and reduce the amount of resources that must be devoted to administrative transactions between providers of care and payers by simplifying these activities. The primary objective of the work group process was to advance Oregon s efforts on the third prong of the Triple Aim for healthcare improvement that is, the reduction or control of the per capita cost of healthcare. The work group believes, however, that administrative simplification can also advance efforts to improve the patient experience of care by making it Office for Oregon Health Policy & Research 5

9 easier for physicians to provide timely information to patients about the cost of health services under their health benefit plans and by facilitating collection of accurate electronic administrative data to support clinical decision-making by providers and improve measurement of the quality of care provided to patients. Standardization and automation are the keys to realizing savings on administrative transactions. The keys to reducing administrative costs through simplification are elimination, standardization, and automation of insurance administrative processes. To date, the federal government and the industry have been unable to standardize administrative processes sufficiently to achieve dramatic system-wide cost savings. That inability has created an opportunity for the state to play a role in realizing the potential for standardizing and automating insurance transactions. Therefore, the centerpiece of the state s administrative simplification strategy must be state-led standardization and automation. International standard-setting organizations long ago developed electronic methods for doing the basic healthcare administrative transactions. In 1996, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) required providers and payers performing health care administrative and financial transactions electronically and the clearinghouses that are intermediaries for many of these transactions to conform to uniform standards and code sets that the legislation directed the U.S. Department of Health and Human Services (HHS) to adopt. Years later, HHS adopted standards developed by the American National Standards Institute-accredited committees for most but not all of these transactions. Compliance was required in In 2009, HHS adopted updated transaction standards, known as version Compliance with the new standards is required by January 1, HHS never adopted standards for several of the transactions the 1996 law sought to standardize. Among the transactions for which no standards has been adopted is a standard for claims attachments, which are clinical or administrative documents submitted to support a claim, whether sent with the initial claim or in response to a post-claim request by the payer. Unfortunately, the HHS standards and implementation guides did not accomplish the degree of standardization that might have facilitated more widespread automation of health care transactions between providers and payers. This is in part because the HHS standards left many issues unresolved. Consequently, payers have developed unique practices and companion guides to fill gaps in ways that suit individual business needs and systems. In addition, while the HIPAA standard transactions can be used to solve certain problems, the HHS rules do not require their full utilization. For example, the standard eligibility verification transaction allows the payer to provide both confirmation of coverage and detailed information about benefits, but it does not require the insurer to provide the detailed information. Consequently, expensive non-electronic communication persists. In Oregon, most providers and many payers still perform many transactions manually that are automated in other industries. The healthcare industry is unlikely to take major strides toward automated processes until there is greater standardization of the methods for conducting the transactions electronically. Standardization has proven difficult for the Office for Oregon Health Policy & Research 6

10 industry to achieve on a voluntary basis. Standardization requires each individual business to make upfront investments in changing systems and work processes. Such investments are rational only if all, or nearly all, payers and providers make similar investments at the same time. Therefore, the state has a central role in enabling the industry to move forward together to greater simplification and automation of administrative processes. Standardization and automation will significantly reduce healthcare administrative expenses of providers and plans. The work group estimated savings to physicians, hospitals, and payers from increased automation of the transactions discussed above. Although the standardization requirements would apply to other healthcare professionals and facilities, there was insufficient information from which to generate savings calculations for them. The estimates do not deduct expenses incurred to transition from manual to electronic because we believe that physician practice transition expenses will be recouped in the first year. The estimates were developed by first estimating the volume of each transaction performed annually, the cost differential for payers and providers doing the transaction electronically versus manually, and the degree to which the transaction is currently being done electronically or manually. Then targets were set for compliance with electronic requirements and take-up of voluntary electronic processes, such as automatic posting from an electronic payment remittance advice. Because credible estimates varied greatly for transaction volume, per transaction savings from going electronic, and the degree to which transactions are currently automated, the group developed ranges for estimated savings. The detailed methodology and calculations are in Appendix A. The savings estimates range from $92 million to $202 million a year beginning in 2014, after rules take effect requiring the first five transactions to be done electronically. Savings potential is greatest for physicians, especially those who do a high volume of office visits. Payers also have much to save. Hospitals probably have the least to save because they have lower transaction volumes relative to net patient revenue and because most are currently more highly automated than physician practices. The chart below summarizes the low-end savings estimates. Assuming personal healthcare spending in Oregon will be about $32 billion a year by 2014, the annual savings from the administrative simplification activities recommended in this report could reduce healthcare spending from.3-.6% by Office for Oregon Health Policy & Research 7

11 Estimated Annual Savings Hospital Physician Payer Total Claim Submission $746,000 $23,499,000 $4,270,500 $28,515,500 Remittance Advice, $625,800 $23,728,250 unknown $24,354,050 including posting Eligibility Verification $3,587,680 $13,018,600 $2,195,856 $18,802,136 Claims Payment (i.e., funds transfer) Claims Status Inquiry and Response All transactions to be electronic by 2014 Insufficient information to estimate the number of transactions. There are some savings for both providers (cost of trips to the bank) and payers (cost of printing and mailing checks). $1,480,640 $13,633,760 $6,010,368 $21,124,768 $6,440,120 $73,879,610 $12,476,724 $92,796,454 The state has a central role to play in enabling standardization and automation of administrative transactions. The state s role in administrative simplification should be to identify and adopt standardized and automated ways to do business and to require payers and providers of healthcare services to use those standard, automated processes. The state should develop a provider outreach plan. The plan should spell out an effort to assist providers by providing technical assistance and tools to use as they make the transition to automated processes. In addition, the state should collaborate with the healthcare industry to monitor progress, identify opportunities for additional standardization, and set priorities, goals, and benchmarks for additional standardization. The phased-in requirements to go all-electronic should be timed so as to further several objectives: The timing should maximize savings for providers, payer, and purchasers in the short-term by moving as quickly as practicable. The timing should allow providers, payers, and clearinghouses to retool their systems to comply with state-adopted standards while they are retooling to comply with the 5010 version of the HHS rules, which providers must follow beginning January 1, The timing should expect providers and payers to function electronically for commercial insurance and Medicaid transactions as soon as they must do so for Medicare transactions. Medicare has required providers to file claims electronically for many years and will require providers to accept an electronic payment remittance advice and electronic payment by January 1, The timing should ensure that physicians and hospitals that comply with Oregon s all-electronic requirements will be well positioned for Medicaid and Office for Oregon Health Policy & Research 8

12 Medicare incentive payments under the American Recovery and Reinvestment Act of 2009 for meaningful use of health information technology. 9 It is critical for the success of this effort that all providers and payers use the standard automated processes. That means the same uniformity and all-electronic standards must apply to all. Standards applicable only to state licensed insurers would fail to address plans that provide healthcare coverage to 16% of Oregonians through self-insured plans and 13% of Oregonians through the Medicaid program. Therefore, the success of this effort to reduce administrative costs will depend on third party administrators, the Division of Medical Assistance Programs, and Medicaid MCOs following the same rules for administrative transactions with providers that DCBS adopts for insurers. Administrative simplification must not end with standardization and automation of the transactions addressed by HIPAA. In addition to standardizing and automating the transactions covered by HIPAA, the state should encourage and support private sector innovation in other areas of administrative simplification. The state s primary role should be to ensure that efforts to reduce administrative costs continue and are effective. It should involve monitoring what is being done, looking for opportunities to partner with industry, and setting priorities and expectations in a collaborative way. From time to time, if it appears that uniform processes will not be adopted sufficiently to result in the desired savings from promising standardization opportunities, it may also involve adoption of uniform standards via the rulemaking authority of the Department of Consumer and Business Services. Oregon Administrative Simplification Recommendations Recommendation #1: Oregon should adopt the Minnesota approach to standardization and automation. The path to standardization and automation has been paved by the state of Minnesota. The work group proposes to expedite the standardization and automation process by adopting Minnesota s approach and adapting the tools it has developed, tested and fine-tuned. In 2007, the Minnesota legislature required all providers and all group purchasers (including health insurers and third party administrators, self-insured health plans, workers compensation and property and casualty insurers) to conduct eligibility verification, claims, and payment remittance advice transactions electronically and to do so in accordance with standard companion guides established through a Minnesota process, rather than in accordance with individual insurer-published companion guides. 9 Many Medicare and Medicaid providers are eligible for financial incentive payments for achieving meaningful use of certified electronic health record systems. To get the maximum payments available under the Medicare program, physicians must achieve meaningful use by 2012 and hospitals must achieve it by The draft meaningful use standard, phase 1, requires providers to file 80% of their claims electronically and to electronically verify eligibility of 80% of their patients. Office for Oregon Health Policy & Research 9

13 Minnesota s Department of Health developed the uniform companion guides by the end of 2008, relying for much of the work on its Administrative Uniformity Committee (AUC). The AUC is a multi-stakeholder body that has worked together for more than 20 years under the aegis of the state to standardize administrative processes in healthcare. Minnesota s requirements to standardize and go all-electronic took effect simultaneously for each transaction one year after the uniform companion guide was formally adopted by administrative rule. The guides, which were prepared to standardize the federal HIPAA 4010 standards, have been in place since 2008 and have been in use since Minnesota has just revised its guides for all three transactions so that they comply with the HIPAA 5010 standards, which go into effect January 1, In developing the guides, Minnesota paid careful attention to emerging thinking nationally, including compatibility with the CORE standards, a set of industry standards to which a number of national carriers adhere. 10 Oregon should adopt and use these guides with minimal adjustments to address issues unique to Oregon and eliminate those unique to Minnesota, confident that they are likely to anticipate any additional standardization that the federal government achieves under the federal reform law. The workgroup recommends that the HLC be asked to invite a wide range of provider and payer technical experts--including individuals from the Medicaid managed care organizations, independent third party administrators, and the Division of Medical Assistance Programs as well as providers of all sorts to assist in reviewing the Minnesota guides and to recommend to the Department of Consumer and Business Services any changes that need to be made before applying them in Oregon. Recommendation #2: Oregon requirements for standardization and automation should be phased-in. The work group s recommended timelines for adoption of the standard companion guides give top priority to transactions where the savings will be substantial for going electronic and for which Minnesota has developed guides eligibility inquiry, claims, and payment remittance advice. Other transactions would become all-electronic as soon as standardization has been achieved by federal action. Study of current work processes and Oregon provider costs and the academic literature on savings from automation suggests that in the near term the greatest savings can be achieved for the system as a whole from automation of claims. Very significant savings can also be achieved from automating eligibility and claims status inquiries and the payment remittance advice. The work group recommends beginning by standardizing the eligibility transaction. First, improved eligibility verification processes are most important to providers. A standard transaction that requires payers to provide more information will have value both to them and 10 CORE standards are agreed to by the Committee on Operating Rules for Information Exchange, a voluntary organization of providers and payers. Office for Oregon Health Policy & Research 10

14 to their patients. By beginning with that transaction, Oregon will signal to providers that the move to automated transactions is designed to have value for them. In addition, an improved eligibility process will result in the denial of fewer claims and reduce the number of resubmitted claims. Finally, although automating claims may generate greater system savings in the short term, going electronic for verifying eligibility will truly transform business processes. For physicians, greatest savings will come from automating posting from an electronic payment remittance advice, followed by verification of eligibility, claims submission, and claims status inquiries; savings from electronic funds transfer may be significant, but the amounts are not known. For payers, greatest savings will come from automating the claims status inquiry, followed by claims submission, and eligibility verification. Hospitals will save much less than physicians and payers because they process fewer claims than physicians and because many are more automated than clinics and physician practices. Some experts suggest that very substantial savings could be achieved by replacing faxed claims attachments with electronic ones. 11 Because HHS has not adopted a standard for such a transaction, however, the work group has concluded the state should not attempt to create one on its own. Rather, Oregon should seek to standardize the way attachments are linked to electronic claims as Minnesota has done in its companion guide for claims. The detailed proposed timeline for standardizing HIPAA transactions and going electronic are set out at the end of this section. For each transaction, the transition process should begin with a period for industry vetting of the guide. The vetting process should by led by the HLC. The industry should examine the Minnesota companion guides and identify any changes necessary to tailor the guides to Oregon. It is important, however, that the guides ultimately adopted by DCBS be as close as possible to the Minnesota guides. By maintaining a tight relationship with Minnesota, Oregon will maximize the likelihood that federal rules and standards will follow the model Oregon has put in place. In addition, by adhering to the Minnesota guides the state will be able to rely on the expertise of the Minnesota AUC in the future. Immediately following the six-month review period, DCBS should begin an expeditious rulemaking process leading to adoption of a companion guide within three months. If for any reason no industry recommendation has been developed by the end of the industry review period, DCBS should adapt the Minnesota guide as necessary and complete the rulemaking process on schedule. Following adoption of the companion guide, providers and payers should be given a nine to twelve months to adjust their systems to comply with the new guide. Then, three to six months later, payers and providers should be required to use the uniform electronic transaction instead of manual methods. In the case of electronic funds transfer and the claims 11 See e.g., Center for Information Technology Leadership, "The Value of Healthcare Information Exchange and Interoperability, Chapter 8 (2004). Office for Oregon Health Policy & Research 11

15 status inquiry, the DCBS rule should time the all-electronic requirement to follow federal adoption of applicable uniform operating rules. The work group recommends that the HLC complete the vetting processes for the remittance advice more quickly than called for in the chart below so that Oregon s companion guides may be adopted before HHS adopts operating rules for that transaction. By doing so, the HLC will increase the likelihood that HHS writes rules that work for Oregon as well as making the most of this opportunity for savings. Recommended Oregon timeline for standardizing HIPAA electronic transactions and going all-electronic Eligibility Inquiry and Response (270/271) Claim (837) Remittance Advice (835) Claims Status Inquiry and Response Electronic Funds Transfer Period for industry review of Minnesota companion guides ends DCBS rule-making to adopt uniform companion guide completed Everyone doing the electronic transaction must follow the uniform guide Everyone must do this transaction electronically 1/1/2011 (end of Q4 2010) 4/1/2011 (end of Q1 2011) 1/1/2012 (end of Q4 2011) 7/1/2012 (end of Q2 2012) 7/1/2011 (end of Q2 2011) 10/1/2011 end of Q3 2011) 10/1/2012 (end of Q3 2012) 1/1/2013 (end of Q4 2012) 1/1/2012 (end of Q4 2011) 7/1/2012 (end of Q2 2012) 7/1/2013 (end of Q2 2013) 10/1/2013 (end of Q3 2013) (276/277) Not applicable Not applicable Not applicable 1/1/2014 (end of Q4 2013) Not applicable Not applicable Not applicable 1/1/2014 (end of Q4 2013) Recommendation #3: Oregon should lead. Oregon should not wait for the federal government to standardize HIPAA transactions. The federal reform legislation enacted this year addresses administrative simplification issues, albeit in a fashion that is in some regards more limited than the proposed approach. Oregon should take advantage of what the federal government will do by way of standardization but should take additional steps at the state level. The federal legislation takes the following steps: It requires the U.S. Department of Health and Human Services (HHS) to periodically revise its standards for HIPAA electronic transactions. It requires HHS to issue rules by mid-2014 setting standards for claims attachments and other transactions for which the agency has never promulgated the rules required by HIPAA. It sets deadlines for issuing uniform operating rules for each of the HIPAA transactions for which HHS has already adopted. It requires providers to accept electronic payment remittance advice and electronic funds transfer from Medicare starting January 1, Patient Protection and Affordability Act, section Office for Oregon Health Policy & Research 12

16 The federal legislation has the potential for pushing HHS to take some critical next steps toward standardization. However, HHS has not traditionally moved quickly with regard to administrative simplification, and the deadlines set in the bill are far in the future, phased in over many years. In addition, it is not clear whether or not the operating rules that HHS must adopt will actually eliminate the proprietary companion guides that make doing business electronically so complex for providers. Therefore, Oregon should adopt the Minnesota companion guides to achieve standardization as soon as possible. In addition, the federal law does not require use of electronic transactions except insofar as it requires providers to accept electronic funds transfer and electronic payment remittance advice from Medicare. If savings are to be achieved from automation of transactions in the Medicaid program and other forms of coverage, state action is required. Therefore, the state should require providers and payers to use uniform electronic transactions. The chart below compares the time when the standardization and all-electronic rules that are necessary for achieving major savings will be in place if the state leaves administrative simplification to the federal government to the time the rules will be in place if the work group s recommendations are carried out: Eligibility Inquiry/Response (270/271) Timelines for Standardization and Automation with and without State Action Standardization with no state action Standardization: Oregon Automation with no state action Automation: Oregon all-electronic Uncertain (1/1/2013 1/1/2012 No requirement 7/1/2012 op rules) Claims (837) Uncertain (1/1/2016 op rules) Payment Remittance Uncertain (1/1/2014 Advice (835) op rules) Claims Status Uncertain (1/1/2013 Inquiry/Response op rules) (276/277) Electronic Funds Transfer 1/1/2014 (HIPAA standard & op rules) 10/1/2012 No requirement (except for Medicare) 1/1/2013 7/1/2013 No requirement 10/1/2013 (except for Medicare) Same as federal No requirement 1/1/2014 Same as federal No requirement (except for Medicare) 1/1/2014 Recommendation #4: Technical assistance to providers will be important to help providers adjust and take full advantage of administrative simplification opportunities. Some providers and payers have been slow to automate insurance transactions because they do not have in-house capacity to reorganize work processes and business systems to take advantage of savings opportunities. The federal government, through the Medicare and Medicaid programs, is offering providers financial incentives for using health information technology including electronic claims and eligibility inquiries. These incentives should help them invest in these systems. We recommend that the Oregon Health Authority, through either the DMAP, HITOC, or Oregon s Regional Extension Center for health information exchange, take the lead in Office for Oregon Health Policy & Research 13

17 developing a program to do outreach to providers and small plans to educate them about the state s administrative simplification strategy, what will be expected of them, and how to get help in making the necessary transitions. The program might develop tools such as webbased claim submission systems that comply with the uniform companion guides. The means of delivering these services should leverage any federal dollars that may be available. Recommendation #5: There is need for ongoing public-private partnerships to identify successes, challenges and opportunities for future administrative simplification. The state s ongoing role in administrative simplification should be carried out systematically. Therefore, the Oregon Health Authority and the Insurance Division of the Department of Consumer and Business Services should collaborate to carry out each of the following activities annually: Collect data from payers and providers necessary to measure rates of adoption of both the uniform standards and all-electronic requirements and any voluntary standards that have promise for reducing administrative cost; Evaluate the state s success in achieving compliance with the requirements of administrative simplification rules and the effectiveness of the rules in producing savings in healthcare administrative cost; Assess progress against plans, benchmarks, and timelines and make any necessary adjustments; Solicit input from providers and payers, including broadly representative groups of industry stakeholders; consumers; and purchasers of healthcare regarding ways to reduce expenses related to healthcare administration; Familiarize themselves with innovative thinking and examine what is being done in other states and in the private sector and what is being done in development of health information technology infrastructure, to inform state-level planning; Identify opportunities for collaboration and for aligning with other states to increase Oregon s leadership role nationally in reducing healthcare costs; Establish priorities, goals, benchmarks, and timelines for development and adoption of uniform methods for conducting healthcare administrative transactions and assign responsibility to broadly inclusive industry organizations for developing and seeking industry adoption of those methods; and Evaluate industry performance relative to established goals, benchmarks, and timelines. The healthcare industry should collaborate and partner with the state to identify opportunities and develop and seek adoption of uniform methods for doing business. The work group Office for Oregon Health Policy & Research 14

18 encourages the industry to complete work on the effort to designate a single entity to collect information used by hospitals and insurers to credential physicians and to put in place a single sign-on system for providers to use to access health plan websites. The work group addressed itself primarily to standardization and automation of purely administrative or financial processes leaving more complex proposals to future work. The work group does not intend to suggest that proposals to standardize or eliminate additional processes are inappropriate. The group particularly urges the state, in collaboration with the industry, to consider whether standardization of plan design, payment methodologies or clinical management protocols may have potential for reducing both administrative and claims cost and improving the quality of care. Next Steps In order to carry forward the strategy and recommendations described in this report, the following steps will need to be taken: The Department of Consumer & Business Services (DCBS) must adopt by rule uniform companion guides for eligibility verification, claims, and payment remittance advice by adapting the Minnesota uniform companion guides. The rules should require insurers and the providers that do business with them to conduct the transactions electronically about a year after adoption of each uniform companion guide. (The recommended content of the rules is outlined in Appendix C.) The Legislature must enact legislation in 2011 giving DCBS authority to establish uniform standards for healthcare administrative transactions to all payers (including third party administrators and self-insured plans) and clearinghouses and to collect data from them to monitor progress and identify future opportunities. DCBS currently has broad authority to set standards for insurers but not for third party administrators, self-insured plans, Medicaid MCOs that are not Oregon licensed insurers, or clearinghouses. The Oregon Health Authority as a payer should follow the DCBS rules and require Medicaid managed care organizations, Medicaid providers, and others with which it deals to do so as well. This means DMAP must prepare to comply with the rules governing payers in the fee-for-service Medicaid program. In addition, DMAP should adopt rules and amend contracts so that providers follow the uniform processes when dealing with Medicaid as a payer and Medicaid MCOs follow the uniform processes in their dealings with providers. DCBS must require insurers and other payers to perform additional transactions electronically on a phased-in basis between 2014 and 2016 setting the dates for each transaction to go all-electronic no later than one year after a HIPAA standard and uniform companion guide or uniform operating rules have been adopted by the U.S. Department of Human Services. (See Appendix B.) The industry should bring forward its recommendation to develop a single sign-on to health plan web portals and a single source for information used in physician credentialing. In addition, the industry should identify and develop additional opportunities for standardization. Office for Oregon Health Policy & Research 15

19 The Insurance Commissioner and the Director of the Oregon Health Authority should take joint responsibility for continued progress toward greater administrative simplification. They should carry out these responsibilities in collaboration with providers and payers, collecting data to evaluate progress; establishing priorities, goals, benchmarks, and timelines; and using rulemaking authority as necessary. Office for Oregon Health Policy & Research 16

20 Appendix A Administrative Simplification Savings Projections Transaction Entity Annual Savings by 2014 Claim Submission Hospital Physician Payer Total High volume estimate (rounded to nearest million) 5,000,000 51,000,000 56,000,000 Low volume estimate (nearest million) 4,000,000 35,000,000 39,000,000 High est per tran savings from manual to electronic (USHEI for provider, Oregon payer average for payer) Low est per trans savings from manual to electronic (USHEI) Estimated current % electronic (based on Oregon provider and 90% 77% 80% payer survey) Goal % electronic 95% 95% 95% High savings est $932,500 $34,241,400 $21,084,000 $56,257,900 Low savings est $746,000 $23,499,000 $4,270,500 $28,515,500 Remittance Advice, incl posting Hospital Physician Payer Total High volume (.99 per claim from one Oregon hospital) 4,950,000 50,490,000 55,440,000 Low volume (.7 per claim from several Oregon providers and Milliman study) 2,800,000 24,500,000 27,300,000 Estimated per tran savings from $.60 per manual to electronic (USHEI) page Estimated current % electronic (posting for providers, sending of RA for payers--or provider and 80% 20% 15% payer survey) Goal % electronic 95% 85% 100% High savings est $1,106,325 $48,899,565 unknown $50,005,890 Low savings est $625,800 $23,728,250 unknown $24,354,050 Eligibility Verification Hospital Physician Payer Total High volume (1.12 average per claim for Oregon providers on the 5,600,000 57,120,000 62,720,000 workgroup) Low volume (.68 lowest per claim for Oregon providers on the workgroup) 2,720,000 23,800,000 26,520,000 Office for Oregon Health Policy & Research 17

21 Appendix A (continued) High est per tran savings from manual to electronic (USHEI for providers, Oregon payer survey for payers) Low est per trans savings from manual to electronic (Oregon work group member av time estimate x OHSU average cost per minute for providers, USHEI for payers) Estimated per trans savings from web to electronic (Oregon work groupmember av time estimate x OHSU average cost per minute for providers) Estimated current % electronic 40% 10% 71% Estimated current % web see 40% 60% electronic Estimated current % phone 20% 30% 29% Goal % electronic (with balance phone) 90% 75% 77% High savings est $4,144,000 $41,326,320 $14,112,000 $59,582,320 Low savings est $3,587,680 $13,018,600 $2,195,856 $18,802,136 Claims Payment (eg, funds transfer) Hospital Physician Payer Total Transaction volume Per transaction savings from check to electronic funds transfer Savings estimate Claims Status Inquiry and Response Hi volume (0.14 average per claim frequency for Oregon providers on the workgroup) Low volume (.14 average per claim frequency for Oregon providers on the workgroup) Unknown - payment is often weekly or biweekly, unknown av claims per payment Savings for depositing check Unknown - payment is often weekly or biweekly, unknown av claims per payment Savings for depositing check Unknown - payment is often weekly or biweekly, unknown av claims per payment Savings for printing and mailing Unknown check Unknown Insufficient information to estimate the number of transactions. There are some savings for both providers (cost of going to bank) and payers (cost of printing and mailing check). Hospital Physician Payer Total 700,000 7,140,000 7,840, ,000 4,900,000 5,460,000 Office for Oregon Health Policy & Research 18